Of the three cost-flow assumptions, when inventory costs have been rising and inventory amounts increasing, LIFO results in balance sheet figures that are _____, cost of goods sold will _____, and _____ reported net income
A)closest to current cost, be out of date, highest
B)out of date, closest to current cost, highest
C)closest to current cost, be out of date, lowest
D)out of date, closest to current cost, lowest
E)closest to current cost, closest to current cost, highest

Question

Quizplus · Accepted Answer

When inventory costs have been rising and inventory amounts increasing, LIFO results in balance sheet figures that are out of date, cost of goods sold will be closest to current cost, and reported net income will be lowest. This is because LIFO assumes that the most recently acquired inventory is sold first, so the cost of goods sold will reflect the most recent costs, which are closest to current cost. However, since the ending inventory is valued using older, lower costs, the balance sheet figures will be out of date. As a result, net income will be lower because cost of goods sold is higher.

Of the Three Cost-Flow Assumptions, When Inventory Costs Have Been